Part guesswork, part experience, part number crunching – how ever you look at it, determining your cake price can be quite a difficult task.
Cake pricing or how much to charge for your cakes can be the most challenging and intimidating question to most beginners in the cake decorating world today.
Unfortunately there are many factors to consider.
But I am going to break it down to just 7 factors that will help you price your cakes in a way that will make you and your customers happy.
Where you live and where you bake will be the most important factor to consider when looking at pricing. If you live in Lekki, your pricing will be very different than if you live in Gbadagry.
Researching your local market is the best starting point to figure out pricing. Call other custom bakers and find out what they are charging. If they are successful and are charging a lot more than you were planning to charge, you need to raise your prices.
- DO NOT UNDERCUT YOUR COMPETITORS
When you are starting a company, you are telling friends, family and clients that you believe you are good enough to open a business.
You may not feel like you are good enough, but pricing your cakes low hurts yourself because you will be working a lot of hours, and not make any money, and you can become known as the CHEAP cake lady.
Undercutting your competitors also hurts them and the cake industry in your area. Bringing prices down in your area can take business away from other companies and cause them to loose income, which can have many unwanted consequences.
Lower prices at the beginning can also make it very hard to raise prices once you have a strong customer base.
They will not want to pay the higher prices and will find the next new decorator to take your place. You want to attract loyal customers that see the quality of work you do and are willing to pay for it.
- KNOW YOUR COSTS
This is a big one! You have to figure out your costs. You will need to calculate what you actually spent or will spend on making a cake.
Here is a list to consider as you calculate your costs
- Overhead: rent, utilities, business cards, posters, office supplies, computer
- Bakery equipment and supplies: mixer, oven, tables, cooling racks, pans, bowls, food coloring, luster dusts, fondant, tools, boxes, cake stands, cake boards, dowels
- Ingredients: flour, sugar, butter, eggs, baking powder, chocolate, vanilla and other specialty ingredients
- Delivery: petrol, wear and tear on your car, your time
- Time: You need to make sure you get compensated for your time. Set an hourly rate for yourself and charge accordingly.
- DO NOT COMPETE WITH SUPERMARKET &FAST FOOD STORE PRICES
When pricing a cake, never try to compete with them. Those cakes were flash-frozen months ago and decorated as fast as possible with buckets of premade icing.
You need to target the customers that are loyal and will come back for great tasting, quality cakes. If you want to know if your prices are too low, compare your prices with the supermarket. If you are close, raise your prices.
- IT’S JUST A CAKE…NO IT’S NOT!
This is something you may hear from customers, or you may have even said it yourself. When a couple gets married/ there is always a picture of the bride and groom cutting the wedding cake. When people go to a wedding, what do they talk about? The dress and the wedding cake!
A wedding cake or a birthday cake is the centerpiece of that event.
Custom cakes are not just cakes. They are works of art that are central to the celebration.
Also, from the business aspect, your cakes are not just a cake you throw in the oven and hope it comes out right. Your cakes are tried and true recipes, icing, cake boards, dowels, fondant, decorating tools, days of work preparing decorations, planning, sketching, designing, and working with the client, then you deliver the cake and make sure it is perfect before walking away.
- DO I PRICE BY THE SERVING (by the number of people the cake can serve) OR BY THE CAKE?
Once you have run your numbers and you know the costs involved, this is usually the next question.
They want to be able to compare prices and feel that they have a basic idea of what they can expect as far as pricing is concerned.
Here are 2 things to consider when setting your prices:
Have a Minimum Price Point
Make it very apparent that your cakes start at a certain price point, such as, “Fondant cakes start at N100.00 per serving” or at N4,000 or “Wedding cakes start at N65,000,” then add that the prices go up depending on the design and size.
This can save you and your customer time. They will walk away if they know the minimum price is too high. You don’t want to spend time emailing and meeting with a customer only to find out they were expecting a three-tier wedding cake for N20,000.
You may have customers that tell you your prices are just too high, but do not lower your prices! You wouldn’t go to a supermarket and tell them their prices are just too high and ask them to give you a discount.
You should not try to make every person that contacts you happy. Stick to your pricing and if they choose to go somewhere else, they may not be the right kind of customer for you.
Pricing specialty cakes
Specialty cakes and carved cakes require a lot more time for designing, structuring and decorating. This is a great time to price by the design.
Be realistic about the time required and price it accordingly. Just because a customer only wants to serve 10 people does not mean it will take you less time than a cake to serve 30 people.
Be honest with your customers, tell them these cakes take much longer than other cakes, and are priced based on the design not on the number of servings.
- YOUR TIME IS WORTH MONEY
Make sure you give yourself credit and include the hours you worked on your cakes. Your prices may seem high to you, but if your research shows that your market will sustain your prices, go for it.
Your time is valuable, so set an hourly rate and stick with it. You have a great talent and should not be making less than minimum wage because you are building your portfolio or because you are just starting out.
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